There are many reasons why the Wealth Tax is the right path for Canadians. Particularly, Wealth Tax achieves the accepted principles of Canadian tax policy - fairness, neutrality, and simplicity:

Fairness: The principle of fairness is generally broken down into the concepts of vertical and horizontal equity. Vertical Equity being the idea that individuals with a greater ability to pay should contribute more in taxes. Horizontal Equity is the principle that taxpayers in similar financial circumstances should face similar tax burdens.

A flat percentage rate Wealth Tax meets both the principles of vertical and horizontal equity. The more wealthy a person is, the more they pay in Wealth Tax - satisfying the principle of vertical equity. Further, people that are equally wealthy will pay the same amount of flat-rate tax.

Neutrality: Tax policy strives for neutrality - meaning that people will not alter their behaviour or alter their normal business transactions in order to avoid taxes. For example, in the realm of income tax normal course strategies to avoid taxes include character conversion strategies to realize 1/2 taxed capital gains rather than fully taxed regular income, income tax deferral strategies to delay income to future years (e.g. “incorporating” a single person services business, borrowing funds against unrealized financial gains, etc.), and characterization of “personal” expenses as business expenses (e.g. tickets to the Leafs, or an expensive meal, in order to “entertain clients”).

Wealth Tax would be solely based on net worth - and accordingly, the only legitimate avoidance transactions are to spend money (which should drive economic growth) or give it away (which should promote equality or charity).

Simplicity: The tax system should be understandable for Canadians and easy to administer. Simplicity helps ensure voluntary compliance and minimizes the time and cost associated with tax preparation for both taxpayers and the government.

Although there can be some complexity and uncertainty in valuing some assets (e.g. private company shares), the Wealth Tax is simple, and would generally require a two page tax return. Page one would include taxpayer identification information, and a simple calculation that includes only a few numbers: (assets - liabilities - $500k Wealth Tax exemption) x 12%. Page two would include a listing of assets and liabilities of the taxpayer.

Further, the requirement of filing a tax return could be limited to only a small subset of Canadians (see more on this in FAQ I(8) below), which again should greatly increase simplicity and reduce administrative burdens on both people and government.

There are many good reasons to abolish income tax.

In our opinion, the principal benefits of eliminating income tax are threefold:

The first is to allow for the acceleration of wealth accumulation to lower wealth persons and families. In other words, it should allow “poor” people to climb the socioeconomic ladder more quickly without the expense and compliance burdens of income tax. Our view is that Canada will be better off with the more “wealthy” families that it can accumulate. Another benefit is that eliminating business income tax will allow our entrepreneurs to concentrate on building their businesses rather than on income tax compliance obligations and mitigation strategies.

Second, the elimination of business income taxes should result in a strong incentive for both Canadians and non-Canadians to invest in Canadian businesses. Particularly, it seems logical that people and organizations from outside Canada will invest and create good jobs inside Canada given that their profits will not be subject to tax while they are reinvested in Canada.

Third, this should attract the best and brightest entrepreneurs (that do not already come from very wealthy families) to Canada - hard working talent that we seek to attract. In other words, a “reverse brain drain”. The reason that they will come to Canada is both for our great existing standard of living, and the incredibly low tax burden they will be entitled to until they “become wealthy”.

Further, we note that our existing income tax system offends all of the tax principles of fairness, neutrality and simplicity discussed in the “Why a Wealth Tax?” FAQ I(1) above:

For example, income tax does not meet the principle of vertical equity, among other reasons, because of the “realization principle” - i.e. the principle that a person is not subject to income tax until they realize their profits. For example, a billionaire might hold investments that increased in value by $100M in a given year - but as long as that billionaire does not sell those investments, they will never be taxed on those gains. This is an inherently unfair result as that billionaire has a $100M greater ability to pay tax but pays none.

HHorizontal equity (discussed above) is also not met by our current income tax system. Again, for example, the billionaire that has not “realized” their $100M gains pays no tax while the billionaire that does sell and realizes their $100M gain will pay many millions in tax.

Our income tax system also, in our view, inherently offends the principle of neutrality (for example, see discussion of converting the character of income to capital gains discussed above in FAQI(1)). Building on our example, instead of selling their investment, our billionaire above will hold that investment as long as they can in order to defer tax (even if it makes no sense to do so from a pure investing standpoint).

Finally, anyone who has attempted to file their own income tax return (or simply pay their employees without the help of a payroll company) is well aware that income tax infringes the principle of simplicity. Canada’s auditor general recently reported that the CRA only gives accurate tax advice to individuals 17% of the time - a tax system that even our tax authorities do not understand is hugely problematic.

See FAQs I(1) and I(2) above. Keeping income tax will negate many (if not all) of the advantages of replacing it with the Wealth Tax.

A corporation does not enjoy or need a meal, does not enjoy or need a place to live, and does not enjoy going on vacation. But what corporations are made up out of is people - its owners (shareholders) and its employees. When a corporation is taxed, it is those people that generally bear it - shareholders through a reduction of the value of their shares, and employees when the corporation has sufficient power over its employees to keep their wages low. A third group is its customers - and some corporations have sufficient market power to pass the cost of its taxes onto its customers. Essentially then, taxing corporations is actually just a way to tax shareholders, employees, and consumers.

This clearly presents more than a few problems for Canadians: (1) Canadians generally do not want the price of the goods and services they buy to be more expensive than they need to be, (2) employees want to be paid as much as possible, and (3) shareholders would like their shares to be as valuable as possible.

This “problem” above in respect of shareholders wanting their shares to be as valuable as possible warrants further comment, as it is not as clearly sympathetic as it is in respect of the consumer and employee problems. For many corporations, the shareholder makeup includes both wealthy and non-wealthy families. For example, a middle-class wage earner might own shares of a corporation indirectly through their pension plan or in their RRSP - therefore corporate tax affects both the wealthy and non-wealthy. Further, the corporate level tax essentially flows-through to both the wealthy and non-wealthy at that same corporate rate. For illustration, take a corporation with two 50/50 Canadian shareholders - one a billionaire and the other a pauper - that pays $100 in corporate income tax. Both the billionaire and the pauper each bear $50 (i.e. equal amounts) of that tax as the shares owned by each will be $50 less valuable.

However, this problem does not arise with a Wealth Tax. Eliminating corporate income tax in favour of the Wealth Tax in this scenario results in the shares held by each of the billionaire and the pauper not going down in value (i.e. both the billionaire and pauper each hold shares worth $50 more than if corporate income tax had applied). However, only the billionaire will be subject to Wealth Tax on that “extra” $50 of wealth (in addition to the Wealth Tax applicable in respect of the other value of their shares), while the pauper will bear none. Thus, the principle of Vertical Equity (see FAQ I(1) and I(2) above) is maintained.

The other aspect of corporate taxation (especially high taxation) is that it inhibits investment by non-Canadians into Canadian businesses. However, taxing non-Canadians on their investments into Canadian businesses only when they repatriate profits to their home jurisdiction (see above FAQ “I(2)”) should encourage investment (including reinvestment of profits) into Canada.

Provided non-Canadians have sufficient incentive to invest in Canadian businesses, it should not matter if rich Canadians choose to become non-Canadian. Our belief is that not subjecting businesses in Canada (whether owned by Canadians or non-Canadians) to income tax (and while their profits are reinvested in Canada) provides a very strong incentive for non-Canadians to invest here, creating strong jobs and wealth.

Further, we think that the rewards of attracting talented people that are not yet wealthy with the promise of no income taxes (think young superstars fresh out of school) outweigh any detrimental effects of losing some already rich Canadians (think persons living leisurely lives off the passive investments from their trust fund).

Finally, as rich Canadians have generally enjoyed and prospered from the benefits of being Canadian, those who wish to “leave Canada” to escape Wealth Tax will be subject to a one-time “exit tax” of 48% of their net wealth over the $500k exemption (ie ~4yrs at 12%).

On a purely informal basis, a combined exemption of $2M for a family of four seems to us to meet the threshold of being “very financially comfortable”. Generally, we would expect this amount of wealth to allow a family to own their own home outright, own investments that generate significant investment income, in addition to providing a material financial cushion to guard against any shocks (eg, unexpected illness, loss of employment, etc.).

Further, Statistics Canada estimates that Canadian households hold approximately $18 trillion of wealth, and that the highest quintile (ie top 20%) of Canadians hold approximately 2/3 of that wealth. Based on these numbers, we estimate that a $500k exemption (on a per family member basis) will result in only the top 10-15% of Canadians being subject to Wealth Tax.

Combined federal and provincial income tax (excluding non-resident income tax) raises approximately $500B each year. Based on $18T of net wealth to Canadian households with approximately 2/3 of this wealth being concentrated in the top quintile of Canadian households, and providing for a $500k per person exemption, we calculated that a 6% annual Wealth Tax would be required to replace that $500B of foregone income tax. The extra 6% (another $500B in revenue) is to fund Pillar II: the NoL Payments (described below).

We also think that 12% is a fair rate, as many high net worth families would be able to generate a similar return on their capital with simply passive investment income.

Each year, certain Canadian citizens and permanent residents would be required to file a two page tax return. Page one would include taxpayer identification information, and a simple calculation that includes only a few numbers: (assets - liabilities - $500k Wealth Tax exemption) x 12%. Page two would include a listing of all assets (some in classes such as “household furniture” and “clothing”) and liabilities of the taxpayer, and the values thereof. Individuals with a net worth less than $400k would not be required to file, and those with a net worth between $400k and $500k would be at the “monitoring level” only (i.e. must file, but would not be subject to tax since they are under the exemption).

Valuation - Most assets will be relatively easy to value (e.g. cash and investment accounts, land and buildings subject to municipal valuations, vehicles, insurance contracts). Some assets will be more difficult, and so will be subject to special rules - for example, some private companies over certain thresholds will be required to obtain formal valuations and inform their investors, discretionary trust interests will be valued as if the full amount of discretionary income or capital was distributed (unless the beneficiary disclaimed or declared limits to their interest), and some stored value and points cards issuers (eg aeroplan points) would need to provide valuations to their cardholders. Although there will be some limited complexity to Wealth Tax, we do think it will still be relatively simple (particularly compared to income tax) even in the most complex cases.

Those giving up their citizenship or permanent residence would be subject to a one time Exit Wealth Tax of 48% (12% x 4 years).

Diminishing one’s wealth by making gifts would not be prohibited. However gifts, subject to certain limited exemptions (e.g. reasonable wedding or birthday gifts) made to non-Citizens or permanent residents would be subject to Exit Wealth Tax at 48%.

Non-Canadians would still be subject to some forms of income tax (including anti-avoidance rules) on business profits expatriated from Canada (e.g. dividend withholding tax, branch profits tax), and on appreciation in Canadian residential properties on an annual mark-to-market basis.

Page 2 of a Wealth Tax return lists all of a person’s assets. Generally, any assets owned by a person not on the list would be subject to 100% penalty tax (the philosophy being that if it is not important enough to include on the list of your assets, then you won’t miss not owning it …).

See "Valuation" section in FAQ I(8) above.

A valid concern in respect of the Wealth Tax is how a person is supposed to pay their Wealth Tax if they do not have liquid assets (i.e. since taxes do not accrue on a “realization principle”, but rather on a fair market value basis). For example, if a person’s wealth is concentrated in their valuable business, it does not seem fair that they would have to sell their business in order to pay their Wealth Tax.

This will not be a problem for most asset classes for the vast majority of people. For example, publicly traded investments can be sold (without incurring any income tax under the Wealth Tax system) and real property can generally be borrowed against.

For the most part, this leaves interests in private companies, partnerships or trusts (“private investments”) as asset classes where liquidity could be a concern. However, there are many tools that could alleviate these concerns: for example, if the private investment is closely held, then options could include offering securities in it to the public (e.g. share or debt offerings) or other private investors. Another possible solution in select situations could be for the government to act as buyer or lender of last resort (e.g. if no other buyer or lender could be found, then the government could take a direct interest in the asset for fair market value, or lend the taxpayer the necessary liquidity with the underlying asset as security at reasonable interest rates). Further, as the Wealth Tax becomes entrenched, wealthy people will begin to appropriately plan for liquidity to pay Wealth Tax (just as they have to under the current income tax system).

In summary then, although liquidity to pay Wealth Taxes is a legitimate concern, tools can be put in place to balance out these concerns. The fact that no income tax will accrue on a sale of investments itself will go a long way to alleviating the issue.

We believe that every person is entitled to freedom from the fear of where their next meal is coming from and where they will lay their head to sleep at night. NoL Payments provide the most efficient way to achieve this.

For example, the Canadian government recently proposed a plan to automatically file income tax returns for people citing the fact that many people that would be entitled to government benefits are not receiving it because they are either not filing, or not filing correctly. Further, a person “on the bubble” for government benefits may fluctuate between being eligible and ineligible for such benefits necessitating repetitive government interactions that - as described at the end of FAQ I(2) above - the government may not have capacity to understand or administer. For a person trying to make ends meet for them and their family, getting through the government bureaucracy is often a time wasting nightmare. Given this, the most efficient system is to provide daily NoL payments to every Canadian citizen and permanent resident, making sure that those who need help get it right away without even having to ask.

In addition, this amount is also intended to provide a meaningful level of confidence to those that are afraid to leave “dead end jobs” for fear of not being able to provide basic needs for their dependents during an interim period. In other words, a person that is “underemployed” can take a chance leaving one job to explore the possibilities of “better” jobs or business opportunities. This should lead to better productivity in Canada by allowing a person to pursue participating in our markets at their best and highest use.

This will also incentivize risk taking and entrepreneurialism. A person can take the risk of starting an unproven business because they know there is a sufficient safety net underneath them.

NoL Payments are intended to be basic needs payments, and only basic needs payments. While various statistical measurements such as MBM and LICO do provide some context as to what constitutes “low income”, they do not really provide accuracy as to what amounts would generally satisfy only basic needs. Accordingly, after a review of various commentary on the subject, we ultimately chose an amount that seemed to fit reality based on our experiences. $40/day equals $14,600. For a family of 2 adults and 2 children, this means $43,800. These amounts are simple, and make sense to us.

We also note that $14,600 approximates the Proof of Funds requirement for a sole immigrant to Canada ($15,263), and $43,800 does materially exceed the PoF requirement for a family of 4 ($28,362) - this Proof of Funds is the amount that immigration Canada estimates an immigrant to Canada may need to support themselves and their family.

Some necessities of life can be acquired for use by a group (e.g. an apartment for a family) - and accordingly dependents do not need as much money to acquire necessities of lift. Although we do not think providing full $40/day to each child is a bad idea, we do think it is unnecessary and would put additional pressure on tax revenue generation.

NoL Payments would be funded through 6% of the 12% Wealth Tax. See FAQ "I(7) - What is the basis for the 12% Wealth Tax rate?" above.

No - NoL payments should not be means tested. In particular, we think its simplicity is its greatest attribute: (1) a requirement to apply for NoL payments would result in many people that need them right away not obtaining them due to governmental “sludge” (see FAQ II(1) above re: many benefits not being paid to the needy because they have not filed tax returns or have not filed them correctly), (2) many people would float above and below any thresholds which again would result in those in immediate need not getting access to funds when they are truly needed, and (3) the costs of administration of a non-means tested plan would be minimal (i.e. every person would get the payment each day unless the person is identified by CBSA as not being in Canada for the entire previous day, and some auditing to make sure that there is no abuse like creating fictitious citizens).

Simplified, we think NoL Payments should be "frictionless".

Not making NoL payments for days spent outside of Canada acts as a brake on using NoL payments to fund purchases outside of Canada. Further, many Canadian citizens live outside of Canada, and in our view it would be inappropriate to use Canadian tax dollars to provide funds to those people on a non-means tested basis. Also, this restriction should not create any meaningful hardship as any person that has the means to travel outside of Canada likely has sufficient resources to miss NoL Payments for those days.

Canadians that travel internationally for work will not receive NoL payments for any day not spent entirely in Canada. This preserves simplicity of administration with minimal risk that the lack of payment will result in the person not having sufficient means for the necessities of life (given that employers generally pay for the expenses of employees while on business travel).

One aspect of Necessity of Life Payments that may (or may not) differ from other forms of assistance payments is that it is a payment that is intended to meet the necessities of life only. Although we suspect that NoL Payments could replace or complement other forms of social assistance (and which we think could result in material administrative savings to governments), those matters would generally be in the purview of more local governments (e.g. provinces) to consider.

At its core, MCT has a dual purpose: (1) incentive increases in Canadian productivity, and (2) to provide cost of living relief to Canadian employees.

Commuting in today’s society is expensive for employees - both in terms of dead time and cash costs. And these burdens seem to be increasing each year as commuting times and distances seem to be getting longer and costlier. With the recent advances in technology, we think that shifting the cost of the burden of reasonable commutes to the employer by mandating a 20% pay top-up for every day that an employer is required to report to a place of business is fair in today’s society. (Another reason we think this is a fair tradeoff is that businesses will no longer be subject to income taxes in accordance with Pillar I.)

The fact that businesses will not be required to make MCT payments for days that an employee is not required to report to a place of business (i.e. an employee that chooses to “go into work” would not be entitled to MCT) is an incentive for businesses to create processes allowing for the elimination (either for some or all days) of an employee’s commute - clearly increasing the possible productivity output of a Canadian by eliminating time and cost of a commute to do the same tasks. For businesses that simply cannot implement processes that require employees to be “at site” (e.g. on-site construction workers), the MCT should not put such businesses at a disadvantage as the business’s competitors would be in the same boat.

Further, we think that decreasing (or eliminating) commutes will also allow employees more flexibility in their living arrangements - for example, a fully remote employee could choose to live in a less expensive location providing relief from home costs in expensive markets. Further, we also foresee that MCT could play a material role in reducing Canada’s carbon emissions from commuting.

No - the MCT should not put such businesses at a disadvantage as that business’s competitors should be in the same boat.